Time to Focus on Fixed Operations

I just attended a meeting with the Minnesota Auto Dealers Association. The dealers were upbeat and enthusiastic after a tremendous month. Profits are up and the biggest concern is whether the good days will last. Similar reports have been reported by NADA. Recognizing that 2011 was stronger than 2010, look at these key measurements comparing 2010 with 2007.

Sales are down, but profits and ROI are up. Dealers are much more focused on expense control and service retention. The article referenced above also quoted Paul Taylor, NADA’s chief economist: “There has been more emphasis on such things as dedicated oil change lanes, aftermarket parts sales and display areas and other efforts to obtain more service and parts sales. New normal means different things in markets that lost the largest percentage of dealerships.”

Some manufacturers have recognized that stronger retail service departments will lead to stronger sales. Toyota offers a two-year maintenance plan. Nissan, Cadillac and Volkswagen offer a variety of warranty and maintenance options. BMW and Mercedes Benz offer pre-paid service packages. Kia has also gained market share with their 10-year powertrain warranty. Have these efforts really helped? Kia reported their strongest sales month ever in November of 37,007 units, a 39.1% increase over the same period last year and the company’s 15th straight monthly sales record. http://www.marketwatch.com/story/kia-motors-america-announces-record-november-sales-2011-12-01

Even from my retail days, I was taught that the first car is sold by the sales team, but the second and third car are sold through the service experience. Are these efforts enough or should retailers focus on gaining back service business that has eroded over the years? I believe that the answer is absolutely yes.

Before you can determine a plan for your service department, it is critical to recognize some of the factors that are problems for a percentage of the dealers:

Most general managers and dealers came from the variable side of the dealership. They focus most of their energy on their area of expertise. General managers will sit in for the finance manager or the desk manager but many would not be as comfortable working as a service advisor of a day.

Many dealerships are divided. The fixed team does not mix with the variable team.

Dealers once controlled 100% of the service and parts retail business. Customers chose to leave the dealer and have their cars serviced by independents. This shift occurred because of high rates, ease of service with smaller independents and poor CSI with the retailers.

Service departments produce the strongest ROI, but they have limited ad budgets.

Many retail service teams have not embraced technology to promote their operations. They rely on direct mail and email campaigns to drive business.

Many dealers do not think loss leader with the fixed operations. They charge $35 for an oil change when the Jiffy Lube charges $30. Some customers would pay a premium to have the convenience with service at the Jiffy Lube operation. The average repair order for a quick lube operation is several hundred dollars, based on data gathered by the manufacturer and provided to retailers…(please note that this is third hand information and may not be correct, but I have heard this number for years.) Customers are paying for the upgrades. Customers are paying the independents for tire rotations, wipers, transmission fluid changes and batteries. The point is that you have the same opportunity to upsell a customer driving into your dealership for an oil change. You may upsell a 50,000-mile service package or a set of tires or a new car by simply getting more aggressive on the price that every customer understands, the price of an oil change. This upselling will however never happen if he/she avoids your dealership because your oil change is $5 higher. The customer is clearly more likely to buy their next car at the dealership that they return to over and over for maintenance items. Toyota and others are betting on this with their programs.

What are progressive retailers doing to combat this problem?

Conduct a series of Google searches to determine how your dealership is performing organically. Sample searches if you are a Ford dealership based in Omaha: Omaha tires, Omaha Ford tires, tires. Take the same step with oil, AC, transmission, battery, etc. You will most likely conclude that you are losing out to the independents. I know a number of gifted Internet directors that focus only on sales because of their pay plan. Consider a bonus if you have a trained specialist at the dealership. Pay a bonus based on a point system for getting more visibility in the first five positions of the Google searches. For example, if the store moves from having one position in the first five spots to fifteen, you will benefit.

Make certain that you have service and parts tied to Google Places and develop a strategy to get reviews posted. The reviews should be specific to the experience in the service lane.

Develop a short-term and long-term marketing plan for service and parts that includes a digital strategy. Apply the same effort that you have done with the variable side.

Tie service into the same opportunities that you have sales involved with (SEM, SEO, and Chat).

Create a series of videos tied to the service department. Examples include oil changes, tire rotation and changes, AC, transmission and basic service. Tag these videos with the cities associated with your market in YouTube. For example, if you are a Honda dealer in Hartford, the tire video would be tagged: “Hartford, tire, change, Honda.” This will help with organic search results with Google.

Identify a video company that can assist with AVSEO (accelerated video search engine optimization). This allows you to publish video with multiple video sites such as Meta Café (sites beyond YouTube).

Consider using a dedicated website for the service department. Some OEMs are considering having rules against this. I know of several dealer groups that have started this process to gain organic search results and create a single focus for the customer.

Make it very easy to schedule an appointment online. Regardless if you are using a dedicated website for service or a blended site, this is critical.

Determine and post your retail rates on the site and online (oil change, tire rotation, brakes). Confirm that you are competitive. Some dealers don’t want to post anything online that is tied to the service department. Didn’t we just go through this over the past five years with used cars? The Internet will win.

Have printable coupons on multiple sites. This gives you the opportunity to track results.

GMs and dealers: spend time in the service department every week.

Consider picking up the customer’s car at his/her place of work and providing a loaner. If the focus is driving customers into the service department, efforts like this are important.

Make certain that your quick lube service is quick. You get one chance to prove that you are better than the quick lube independents.

Give every car, regardless of the type of service, a car wash and promote this online.

Tie your service team to your social media.

One final thought: the trend to cut expense has become so dominant with retailers that some teams have become paralyzed into not taking any action. They may believe that a new concept that they have never used will work, but they simply can’t pull the trigger with fear that they will be criticized. Others will start a new plan and abandon it if the return is not apparent within the second month. Be bold and put forth the effort on the safe bets. Investing in your service department is a safe investment.